No more competing divisions: Microsoft announces major reshuffle

The goal is "One Microsoft."

We've heard rumblings of an imminent Microsoft reorganization for some months; today, it came to pass. CEO Steve Ballmer has announced the company's new shape and its new approach to developing products.

The reorganization sees an end to the product-based divisions such as "Windows and Windows Live" and "Microsoft Business Division." What Ballmer wants instead is "One strategy, one Microsoft." To do this, the company is being organized by function. Microsoft will have four engineering teams—operating system, apps, cloud, and devices—and then a number of company-wide groups for Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, Legal, HR, and Operations. Here are the main groups:

Terry Myerson, formerly head of the Windows Phone team, will take charge of the Operating Systems Engineering Group. This group will manage all operating system development, from phone to console to PC to cloud. The team will also own certain core cloud services.

Julie Larson-Green, formerly head of Windows engineering, will take charge of the Devices and Studios Engineering Group. This group will manage the development and supply chains of all Microsoft devices, from mice to Xboxes, and will also be the home of all music, video, gaming, and entertainment teams.

Qi Lu, formerly of the Bing team, will run the Application and Services Engineering Group. This will house productivity and communication software (such as Office and Skype) and search.

Satya Nadella, formerly president of the Server and Tools division, will head the Cloud and Enterprise Engineering Group. This group will own data center and database software. It will also continue to be responsible for developer tools.

Eric Rudder, formerly chief technical strategy officer, will lead the Advanced Strategy and Research Group, focusing on new technology trends and trustworthy computing.

Tami Reller, formerly the chief marketing officer and chief financial officer in the Windows division, will lead a new Marketing Group that will also centralize all advertising.

Tony Bates, formerly Skype CEO, will run the Business Development and Evangelism Group, both working on partner relationships (such as those with Nokia, Yahoo, and PC OEMs) and evangelism and developer outreach.

Amy Hood will continue as chief financial officer, and the Finance Group will now centralize all finance operations that were previously managed within each division.

The Dynamics division will continue to stand somewhat apart from the rest of the company due to what Ballmer calls its need for "special focus."

Human Resources (which will continue to be led by Lisa Brummel) and Legal and Corporate Affairs (which retains Brad Smith as General Counsel) will remain in much the same form as they take today. Similarly, Kevin Turner will continue as COO, overseeing worldwide sales, stores, IT, and licensing operations.

Ballmer also announced some other personnel changes. Kurt DelBene, president of the Office division, will be retiring. Craig Mundie, who has been serving as advisor to Ballmer, will now devote all his time to a "special project." Rick Rashid, formerly chief research officer and head of Microsoft Research, will now move into the OS engineering group to drive core OS innovation.

In addition to describing the new groups within the company, Ballmer also outlined Microsoft's new way of working. He emphasized five adjectives: nimble, communicative, collaborative, decisive, and motivated. Microsoft has already started down this path with Windows 8.1. Major products, such as Windows and Office, will have teams that span the different engineering groups, so they will draw technology from all these groups.

For most of the company, this represents a major organizational and cultural shift, and it won't take place overnight. Ballmer said that the reorganization process will take at least until the end of the calendar year.